Stocks Continue To See Significant Weakness In Mid-Day Trading - U.S. Commentary

4/23/2012 12:02 PM ET

Stocks are seeing substantial weakness in mid-day trading on Monday after showing a notable move to the downside earlier in the session. A negative reaction to troubling news from overseas continues to weigh on the markets.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 141.26 points or 1.1 percent at 12,888.00, the Nasdaq is down 41.90 points or 1.4 percent at 2,958.55 and the S&P 500 is down 15.23 points or 1.1 percent at 1,363.30.

Much of the weakness on Wall Street stems from renewed concerns about the global economy following the release of disappointing economic data from China and Europe.

Considerable selling pressure was generated by a report from HSBC Holdings and Markit Economics showing a continued contraction in Chinese manufacturing activity in the month of April.

While the manufacturing purchasing managers' index for China climbed to 49.1 in April from 48.3 in March, a reading below 50 indicates a contraction.

A separate report from Markit showed that its index of private sector activity in the Eurozone dropped to a five-month low of 47.4 in April from 49.1 in March.

Markit Chief Economist Chris Williamson said, "The flash PMI signaled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter."

Traders have also reacted negatively to news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande.

Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6th, raising concerns about a setback to efforts to diffuse the European debt crisis.

Among individual stocks, shares of Kellogg (K) have come under pressure after the cereal market lowered its full-year 2012 financial guidance based on a weaker-than-expected first quarter performance. Kellogg is currently down by 5.4 percent.

ConocoPhillips (COP) is posting a more modest loss after the energy company reported first quarter adjusted earnings that came in below analyst estimates amid a drop in oil production.

Pfizer (PFE) is also trading lower after the drug giant announced that it has entered into an agreement to sell its Nutrition business to Nestlé for $11.85 billion in cash.

Sector News

With the disappointing economic news from overseas raising concerns about demand, steel stocks are turning in some of the market's worst performances. The NYSE Arca Steel Index is down by 2.6 percent after hitting a three-month intraday low.

Housing stocks have also moved sharply lower over the course of the trading day, dragging the Philadelphia Housing Sector Index down by 2.6 percent. M/I Homes (MHO) has helped to lead the housing sector lower, falling by 7 percent.

Significant weakness is also visible among gold stocks, which are moving lower along with the price of the precious metal. With gold for June delivery falling $9.70 to $1,633.10 an ounce, the NYSE Arca Gold Bugs Index is down by 2.6 percent.

Airline, retail, internet, and networking stocks are also seeing considerable weakness, moving to the downside along with most of the major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Monday. Japan's Nikkei 225 Index edged down by 0.2 percent, while Hong Kong's Hang Seng Index tumbled by 1.8 percent.

The major European markets also came under considerable selling pressure. While the U.K.'s FTSE 100 Index fell by 1.9 percent, the French CAC 40 Index and the German DAX Index plummeted by 2.8 percent and 3.4 percent, respectively.

In the bond market, treasuries have shown a strong upward move amid the global economic concerns. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.1 basis points at 1.919 percent.